Most bank executives are happy to be free of merchant credit card processing, relying instead on outsourcing. Elias J. Eliopolous is different.

The executive vice president of First National Bank of Omaha presides over one of the last remaining merchant processing operations wholly within a bank-and not an awfully big bank, either.

With $3.7 billion of assets at midyear, First of Omaha ranked 158th in American Banker's statistical review. The other banking companies among the top 10 acquirers of credit card transactions include Chase Manhattan Corp., which outsources; and National City Corp. and Bank One Corp., which do it through arm's-length subsidiaries.

Size has not stopped First of Omaha from competing against the larger organizations for relationships with retailers. The Nebraska bank is 10th among merchant processors, and considers accounts with smaller stores its specialty.

It expects to handle nearly $20 billion in merchant transaction volume this year, 20% more than last year, when it counted 71,500 merchants as customers.

"We are attempting to be as self-sufficient as possible," Mr. Eliopolous said. "So when we decide to do something, we have the resources to do it."

Some banks that want to retain their relationships with merchant customers have done so by handing over the nitty-gritty of back-office processing to a third party, such as First Data Corp. or Nova Information Systems Inc. Financial institutions that entered into such alliances say outsourcing is easier and less expensive than doing the work in-house.

But Mr. Eliopolous said it is better for the merchants when one institution handles both the processing and the banking.

"It comes back to customer service," Mr. Eliopolous said. With "the knowledge that you acquire in processing ... you can take care of the customer a lot better."

For instance, he said, when problems arise he can get to the root of them right away instead of having to tell a customer, "Let me make some phone calls and call another vendor."

Consultant Paul Martaus said First of Omaha is especially good at signing up reliable merchants. "They have got their underwriting down," said Mr. Martaus, president of Martaus & Associates in Clearwater, Fla. "They know how to insure for risk, and they're a quality provider."

Like many other aspects of the banking business, transaction processing has been consolidating apace as companies seek economies of scale. In one recent example, Nova bought PMT Corp., merging what had been the 11th- and 12th- largest processors to create the fourth largest.

Mr. Eliopolous said First of Omaha is undaunted on its independent course, steadily adding merchants and transaction volume but seeing no need to bulk up beyond that.

"We do not believe that size is the key to success," Mr. Eliopolous said. "We don't think just because the other guys got bigger, that is a key to success."

First of Omaha's independent spirit is in character. Its parent company, First National Bank of Nebraska, is mostly owned by one family, the Lauritzens. The stock trades thinly over the counter. The last trade was Oct. 19, at $3,400 a share.

"We don't have pressure from Wall Street," Mr. Eliopolous said. "We look at things from a long-term perspective, not next quarter's earnings."

The Omaha bank's customers "are quite loyal," said Stanley Anderson, president of Anderson & Associates of Arvada, Colo. They "don't jump ship for 2 basis points."

Since moving over from the card-issuing side of the bank in 1996, Mr. Eliopolous has trumpeted the need to invest in technology. As a result, the bank has developed sophisticated data mining capabilities and is serving merchants on the Internet.

First of Omaha has also been in the forefront of offering enhanced data capture to purchasing-card customers. Many banks have been striving to provide the degree of transaction detail known as "level three," but few have achieved the goal.

Level three systems record extensive data about a transaction at the time of authorization. The details-including product codes, freight amounts, and quantities-can be presented back to the merchant in monthly statements.

Last August, First of Omaha announced it had completed installation of the service for two of its larger customers, NAPA Auto Parts stores and Griffin Oaks Marine Travel.

First of Omaha's investment in technology has dovetailed with its work on year-2000 compliance. The company began working in-house on year-2000 initiatives in 1995 and is assuring clients continuously that the conversion will be smooth.

"We are pretty confident that our customers are far more satisfied with our service than the other guys,'" Mr. Eliopolous said.

Mr. Eliopolous, 54, was born in Athens and moved to the United States in 1963 and got a bachelor's degree at Creighton University in Omaha four years later. He followed up with a master's in economics at the University of Nebraska at Lincoln in 1969.

He felt at home in the Midwest. "I especially like the people," he says; he felt they accepted him.

His first job out of school was as a First of Omaha management trainee. He rose through the ranks on the operations side, which he ran for 21 years until he took the helm of the merchant processing division.

Mr. Eliopolous' leadership of the processing division and stable management have helped the bank stay in the vanguard, Mr. Anderson said.

It is remarkable "for somebody to have come in (to merchant processing) from outside to do in two years what he has done," Mr. Anderson said. "He knew how far he could push things."

First of Omaha is using its expertise and technology to pass along cost savings to merchants, Mr. Eliopolous said. The credit card associations often change the rules merchants must follow to accept transactions and get price breaks; First of Omaha tries to help them maximize savings, he said.

"We have been focusing more and more on interchange"-the fees banks pay each other to clear transactions-Mr. Eliopolous said. "It is the common belief among corporate accounts and customers that interchange is interchange. Needless to say, we feel that by managing the data to its fullest extent, you can reduce your cost of interchange."

Unlike nonbank processors, First of Omaha has the advantage of being a direct member of MasterCard International and Visa U.S.A., avoiding intermediary fees.

Mr. Martaus said passing such savings along ought to pay off.

"A lot of merchant processors-if they were able to garner an advantage of that sort-would choose to keep the difference," he said. "The folks in it for the long haul try to maximize the relationship-and the profits."

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